Auditing Sample Case Study Memo
Team D (Wayne Brown, Melissa Ginez, Matthew Gourlie, Juel Rypka)
University of Phoenix
ACC/491
Alisa Dumond
December 19, 2011
------------------------------------------------- interoffice memorandum to: John Smith, CEO Key west company from: Audit Team D subject: Audit Findings for Key West Company date: 12/18/2011
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Dear Mr. Smith
The purpose of this memo is to communicate to you the results and findings from our team’s assessment of the Accounts Receivable balances for Key West Company as of 20X1. Our team has already completed a thorough evaluation of the company’s internal control and we believe they are excellent. Therefore, the
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The sample interval is determined by taking the book value and dividing the sample size (Boynton & Johnson 2006). After plugging in the numbers, we calculated the sampling interval to be 45,454, which is shown on slide 5 of the presentation. We also anticipated for any clients, which did not provide a response we will use an alternate procedure to determine the correctness of the balances for those client. To implement a new course of action, everything must be weighted to see if the cost does not out-weigh the benefits. By looking over how the wanted system will affect the outcome of the company is of great consequence. However, when deciding which system to incorporate is where the analysis comes in play. The accuracy of records is very important, due to the fact that companies get in trouble by government, customer, share holders, employees is all documentation is not followed correctly. Having the means and the
In order to confirm the accounts receivable balances, I decided to use positive confirmations since this was my first time auditing the company and the collateral for the loan would be the receivables. The confirmations helped to verify the accuracy and existence of the accounts. I also calculated the Receivables Turnover Ratio in order to better evaluate the overall success of collection on accounts. The sample size that I chose was determined by the factors of tolerable misstatement, inherent risk, control risk, achieved detection risk
I hope you’re doing well, I am the new audit staff and I would be auditing the Employee Handbook . I have two questions that would really help me in performing the Employee Handbook Audit Engagement. First , can you provide me with information about the steps taken to ensure that all the required forms that are needed to be signed by Life Care Assurance Employees are complete and returned to Human Resources on time , also can you provide me with information about the order in which the Employees Handbooks are filed , are the Employee’s Handbook arranged according to Employees first name /last name or by department name.
Accounting information systems (AIS) are useful instruments businesses use in the management of business activities. The kind of system installed depends on the size, nature of a business and the objectives managers have. One common objective though is that to minimise cost and increase
In today's time the accounting and book keeping ranges from the old way of paper and pen to extremely large accounting data base systems for the major companies and organizations around the world; although either system could be used but
As shown in the table above the audit is thorough and examines all aspects of the coagulation process and all the relevant management and technical documentation that surround it. As shown in the table above the scrutinising of documents is essential when carrying out an audit in every standard that is examined. It is important that all processes involved in the audit are documented and that are followed on an everyday basis. Not only does the vertical audit examine procedure documents, but audits QC, validation and servicing of the equipment, training and reagents used in the processes involved.
In situation #5, one of customer accounts for nearly 15% of Pinnacle’s accounts receivable balance and with no payment for several months. This indicates that Pinnacle may have trouble to collect that account receivable in time.
An assessment of inherent risk is important for determining the possibility of material misstatement before considering internal control effectiveness (259). Obtaining an understanding of internal control is the basis for determining control risk (410). This understanding helps the auditor determine areas of weakness, which may require more attention. Analytical procedures indicate possible misstatements and unusual fluctuations requiring substantive tests of transactions or tests of details of balances for proof of misstatement occurrence. Substantive analytical procedures can also help reduce the sample sizes needed or certain tests of details of balances (406). Assessment of planned detection risk is the risk that material misstatements will not be discovered by the audit as planned and involves either disregarding internal control in the substantive approach resulting in more evidence being gathered or considering internal control in the reducing risk approach resulting in less evidence being gathered. Performing tests of controls is only necessary if one is following a reducing control risk approach. If following a substantive approach, the auditor can ignore testing controls
10. Review the adequacy of the allowance for uncollectible accounts by performing the following procedures: a. Review the aged trial balance of accounts receivable with the president. b. Review confirmation exceptions for indications of disputed amounts. c. Analyze and review trends in the following relationships: (1) Accounts receivable to net sales. (2) Allowance for bad debts to accounts receivable. (3) Bad debt expense to net sales. 11. At year-end, review the file of sales invoices that are waiting to be matched with delivery receipts for any sales transactions that were not executed and, therefore, should be recorded in the subsequent period. 12. For all sales recorded in the last week of the year inspect the related delivery receipt to determine that the sale occurred before 12/31/X5. 13. Review credit memoranda for sales returns and allowances through the last day of fieldwork to determine if an adjustment is needed to record the items as of year-end. 14. Perform analytical procedures for sales and accounts receivable including comparison of the following to prior years and/or industry data: a. Gross profit percentage by month. b. Sales by month by salesperson. c. Accounts receivable turnover. d. Advertising expense as a percentage of sales. e. Net receivables as a
When engaged in auditing a public firm, such as Apollo Shoe Inc., an auditor must determine when to trust in the company’s internal controls and when to ascertain auxiliary testing methods are obligatory to analyze control risks. The sales and collection cycle is rather a substantial fraction of the audit because this unique segment employs a multitude of documentation and records ranging anywhere from customer and sales orders, shipping documents, credit memos, and general journal entries; therefore, a working
Garners’ accounts receivable management ratios appear to be lower than its industry average which is an indication of good management since it desires to receive payment sooner than the industry average (Cornett, Adair, Nofsinger, 2015). The company could have too much control on its crediting terms, and might look into decreasing its crediting procedure slightly; however, for the most part, the company is doing well in collecting payments.
| * David should keep a straightforward and honest relationship with MAL. * David integrity will be compromised if these errors are discovered.
McCrimmon Parkway Temporary Road Closure: Staff have not received any new information on when work may begin. Information will be shared with Council and residents when it becomes available.
Furthermore, SAS 47 notes that those accounts that require subjective judgment in determining their value generally present an increased risk of error. In addition, those accounts that represent a large percentage of total assets generally present a greater risk of potential litigation because a small percentage error in an account with a relatively large balance can result in a material misstatement. Thus, as table 1 shows, the study wants to follow Bell et al. (1991) to control inventory intensiveness, receivable intensiveness, cash position, sales growth and sales size: Inventory intensiveness = inventory / sales; Receivable intensiveness = receivable / inventory; Cash position = cash / (sales (net) – operating income before depreciation). Cash position measures are included as indicators of the client's ability to generate adequate future cash flows. The industry- standardized measures should provide an indication of the strength of the client's current working capital or cash position (i.e., a degree of deficiency). The paper expects a positive trend in either cash-to-fund expenditures or the current ratio for survived companies to imply a tendency toward better and better future cash or working capital position.
Apart from the PFS staff members, there were others who gained access to the dashboard and had their own set of tools. Managers had their own “receivables dashboard and tools” (Souza & McCarty, 2007, pg. 69, para.4) and thus they were enabled to monitor adjustments, payments, revenue, and days for periods from the previous day and weeks to the 18 months of operation. It is important to calculate the average daily revenue and in the 30-day period. This tool enabled managers to do so and to assess their performance for the month to date. Thus, they would be in a position to estimate the likely results at the end of the month and assess all receivables and thus select any segment for quick analysis. The tool would be able to generate timely reports as demanded which includes the” age analysis. A/R stratification, discharged not final billed (DNFB) analysis” (Souza & McCarty, 2007, pg. 69, para.4). However, analysis of problem payers and credit balance analysis was made possible by this tool.